Good day, and welcome to Acadia Healthcare's First Quarter 2026 Earnings Call. (Operator provided instructions.) Please note, this event is being recorded. I would now like to turn the conference over to Todd Young, Chief Financial Officer. Please go ahead.

Thank you, and good morning. Yesterday, after the market closed, we issued a press release announcing our first quarter 2026 financial results. This press release can be found in the Investor Relations section of the acadiahealthcare.com website. Today, Debra Osteen, Acadia's Chief Executive Officer; and myself, Todd Young, Chief Financial Officer, will discuss the results. To the extent any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP in the press release that is posted on our website. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Acadia's expected quarterly and annual financial performance for 2026 and beyond. These statements may be affected by the important factors, among others, set forth in Acadia's filings with the Securities and Exchange Commission and in the company's first quarter news release. And consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. At this time, I would like to turn the conference call over to Debra.

Good morning, and thank you for joining us. I'm pleased to be with you today to discuss Acadia's results for the first quarter of 2026. Since returning as CEO, I have spent time in the business, listening to our teams, assessing operations and getting close to the drivers of quality and performance. Our mission is unchanged, and I continue to be impressed by the hard work and dedication of our clinicians and employees across the country and the important work we are doing to provide safe, quality care for those seeking treatment for mental health and substance use issues. Across Acadia, we share a clear purpose: meeting a critical need and making a difference in the communities we serve. As the nation's leading pure-play provider of behavioral health services, we are uniquely positioned to address this growing unmet need with our 275 facilities serving more than 84,000 patients daily. We have a strong foundation, an integrated model of care, a deep focus on clinical quality and a proven operating approach. As I shared in our last call, we are focused on building on our strong foundation with operational discipline and consistent execution to deliver significant sustainable value creation. I have great confidence in our teams and in the near- and long-term direction of the company, and I am fully committed to supporting Acadia through this next phase of execution and improvement. Our first quarter financial and operating results marked a good start to 2026. We delivered revenue at the high end of our guidance range and exceeded the top end of our adjusted EBITDA and EPS range. Our revenue growth was driven by our acute inpatient psychiatric facilities with 14% growth compared to last year as we increased inpatient volumes by 6.2%. Our specialty team also delivered better-than-expected results by mitigating some of the challenges in Pennsylvania. On the CTC side of the business, while we grew 2.5% compared to the first quarter of 2025, growth slowed sequentially from quarter 4 as that business was impacted by the severe weather we noted on our February call as certain centers had to be closed during that time. The increase in volumes across Acadia reflects the continued strong demand for our services. Our revenue growth and strong focus on operational improvements and efficiencies at every level of the organization drove adjusted EBITDA to $144.2 million, $7.2 million above the high end of our guidance. Our good start in quarter 1 is allowing us to raise our full year adjusted EBITDA guidance by $5 million at the midpoint. Todd will walk through the financial results and our guidance in more detail. For 2026, our primary focus is operational execution and deriving more value from our facilities and recent bed additions. That starts with people, having the right leaders in place and supporting our operators in the field. It also requires clear decision-making and accountability at every level so we can drive stronger fundamentals and more consistent performance across all four lines of business. During my first three months, I have conducted talent reviews and reviewed our operational structure across our businesses to evaluate leadership at the facility level and the layers and scope of operational oversight above it. As a result, we have made leadership changes at multiple levels, including bringing new leaders into Acadia. As part of this review, we have reorganized and restructured our acute service line with two changes. First, we reduced the number of facilities and geography within each division to enable greater focus and oversight of our facilities. Second, we have created a new operating group for acute facilities, which will focus on our joint venture hospitals and recently opened facilities. This included hiring a new experienced leader for this group, who will be focused on continuing to build strong relationships with our JV partners and strengthening our referral networks. These changes in our acute service line are intended to support our teams in the field and improve execution. Alongside the talent work, my leadership team and I have been engaging directly with our teams to reinforce priorities and rebuild a culture of urgency around access to care and patient treatment. We have also focused on our referral relationships. These relationships are critical, and we are pleased with how the teams at the facility level are prioritizing these relationships and working with these partners. We currently have a strong, diversified referral base across all service lines and regions. Over the last three years, we have added over 2,500 beds in new facilities and through expansions in existing facilities. These investments expand access to care and increase the number of patients we can serve each day. The demand is there, and our goal is to meet that demand with high-quality patient care and ensure that we eliminate barriers for treatment through prompt response times. We are focused on execution, referrals and leadership at all our facilities, but particularly in locations that have not ramped as quickly as expected. We have completed in-depth reviews of facilities opened since 2023, and each of these facilities now has a clear action plan to expand access to care. As a result of this increased focus, this group's revenue and adjusted EBITDA results in quarter 1 were ahead of our expectations. We remain confident in this group delivering on $200 million of adjusted EBITDA growth relative to 2025. We continue to evaluate each facility and market on an individual basis, and we are applying learnings from past openings through a clearer, more standardized approach to new hospital launches. We are focused on our 2026 openings and have adjusted our planning process to support successful execution. In early February, we opened our JV facility with Tufts Medicine in Greater Boston. We have 24 beds open today, and once fully licensed, we will be able to serve 144 patients. During quarter 2, we expect to open two facilities in partnership with Premier Health Systems, our 144-bed JV facility with Orlando Health and our 96-bed facility with Methodist Jennie Edmundson in Iowa. Our joint ventures and the new beds added provide an opportunity to leverage our combined expertise and resources with a shared commitment to provide quality care and achieve strong clinical outcomes. While we are reducing our capital investment by over $300 million compared to 2025, we are finalizing investments in these new JV facilities while also adding beds to existing facilities. In the first quarter, we added 82 beds and are on track to add 400 to 600 beds over the course of the year. This focus on operational execution also drives a focus on efficiency. Over the last few years, Acadia has invested in technology, data tools and process improvements that give our facility leaders better real-time visibility into day-to-day operations. These tools help us make more informed operational decisions and deploy resources more effectively across facilities. We are aligning staffing resources more effectively with patient needs and operating conditions, improving workforce planning and reducing inefficiencies such as premium labor. We believe this more disciplined approach supports stronger operations, a better working environment for our teams and a more stable care environment for our patients while maintaining our commitment to quality, safety and care delivery. Our corporate team has also reduced headcount to reflect the renewed focus on supporting our operating teams effectively. This renewed focus on management and expense discipline across the organization contributed to adjusted EBITDA exceeding our expectations in quarter 1. As we have been evaluating all aspects of our business, the most important driver of our success is our people. We are pleased that for the eighth consecutive quarter, our staff retention has improved. We are focused on talent at every level because the right people with the right training enable us to provide the best care to our patients. We are measuring that care through enhanced outcomes tracking through more programs. The ability to measure and validate outcomes is especially important for collaborating with payers who are very focused on clinical health outcomes for their members. Positive outcomes are equally significant for our referral partners as they reinforce the rationale behind entrusting their patients to our care. As we look ahead, demand for our services remains strong, and we are focused on consistent execution across our care continuum. Above all, we remain committed to our mission and to providing high-quality care for patients and the communities we serve. With that, I will turn it over to Todd to review the financial details and our expectations for the second quarter.

Thanks, Debra. Turning to our first quarter results. We reported revenue of $828.8 million, representing a 7.6% increase over the first quarter of last year. Same-facility revenue grew 7.3% year-over-year, driven by a 5.6% increase in revenue per patient day and a 1.6% increase in patient days. Our Q1 revenue growth was driven by our acute and RTC businesses, which grew 14.2% and 6.3%, respectively. Acute performance was driven by increased patient volumes. In addition, we benefited from supplemental payments in line with the Q1 guidance we provided in February that were not in our first quarter results last year. We were also pleased with the performance of our specialty business as it mitigated a portion of the expected volume losses in Pennsylvania from New York's decision to not provide care for their residents in our Pennsylvania facilities. We continue to be very focused on diversifying our referral base to surrounding states and Pennsylvania. The decline in our specialty facility revenue of 6.5% was driven by the previously discussed challenges in Pennsylvania and from closing specialty facilities in 2025. The closures created nearly a 6% headwind to growth. Our CTC revenue grew 2.5% compared to the first quarter of 2025, but it slowed sequentially as it was negatively impacted by the severe winter weather we called out on our Q4 2025 earnings call in February. The weather negatively impacted our total adjusted EBITDA in Q1 by $3.7 million, in line with the Q1 guidance we provided in February. Adjusted EBITDA for the quarter was $144.2 million or 7.5% growth over Q1 2025 and $7.2 million above the high end of our Q1 guidance. Our adjusted EBITDA performance relative to our guidance was driven by strong performance across our acute facilities, including, as Debra mentioned, outperformance from our new facilities opened since 2023. We also delivered better-than-planned cost efficiencies at both corporate and at our facilities. We did have a $3.2 million benefit related to employee benefit costs that we expect will reverse in the back half of 2026. Our losses from start-up facilities were $12 million, $2 million better than our $14 million forecast, primarily from operating efficiency improvements. We had $3 million in net operating costs associated with closed facilities. On a same-facility basis, adjusted EBITDA was $199.5 million in the first quarter. From a balance sheet perspective, we remain in a solid financial position. As of March 31, 2026, we had $158 million in cash and cash equivalents and approximately $565 million available under our $1 billion revolving credit facility. Our net leverage ratio stood at approximately 3.9x adjusted EBITDA. With operating cash flow of $62 million and CapEx investments of $77 million in the first quarter, our free cash flow was a negative $15 million. Our free cash flow improved $148 million compared to Q1 of 2025. As we've previously noted, we expect our total CapEx in 2026 to be between $255 million to $280 million, with the second half of the year being lower than the first half as we opened our three new JV facilities in the first half of the year. We continue to expect positive free cash flow in 2026. We also collected $16 million in cash from the sale of three closed facilities. Moving to development activity. During the first quarter, we added 82 beds while closing 251 beds. The closures primarily related to two leased facilities in Pennsylvania and two other facilities that have been announced in 2025. Looking forward to 2026, as Debra noted, we expect to add between 400 and 600 new beds, primarily through the opening of new facilities nearing completion. While we typically do not provide financial guidance for the second quarter, given the substantial out-of-period supplemental payments received from the State of Tennessee in the second quarter of 2025, we are choosing to do so this year to provide clarity to the investment community. In Q2, we expect to deliver revenue between $835 million and $850 million, adjusted EBITDA of $142 million to $152 million and adjusted EPS of $0.30 to $0.40. For the full year, our revenue guidance of $3.37 billion to $3.45 billion remains unchanged. While we expect to do better in mitigating our specialty headwinds in Pennsylvania, this improvement is expected to be offset by modestly higher-than-expected levels of bad debts and denials. With respect to our full year expectations for adjusted EBITDA, we are increasing the range from $575 million to $610 million to $580 million to $615 million. For adjusted EPS, we are increasing our range from $1.30 to $1.55 to $1.35 to $1.60. I want to note that given the significant EBITDA earned in Q2 of 2025 from the Tennessee supplemental plan, our 12-month rolling adjusted EBITDA is expected to be between $559 million and $569 million. As a result, our net leverage will be approximately 4.4x to 4.5x at the end of Q2. We expect this higher leverage to be temporary as we expect to end the year in the 3.9 to 4.2x range we guided to in February. Our team continues to focus on supplemental payment programs that we are confident will be approved in 2026, but we have not included any unapproved programs in our guidance. We continue to estimate that certain programs currently under regulatory review could add at least $22 million in incremental EBITDA to our guidance if they receive approval this year. Based on the latest insights regarding Ford's plan, the $22 million may be conservative. I will now turn the call back over to Debra for closing remarks.

I want to end our prepared remarks by thanking Todd for his contributions to Acadia, and I wish him well in his next chapter. I'm proud of the important work we are doing across Acadia to address a critical need in our nation. For 2026, our strategic priorities are aligned to improve our financial and operating performance through consistent execution. We are well positioned to apply our scale and expertise to help set the standards for care that address the escalating demand for behavioral health and substance use treatment. We will continue to strengthen our capabilities with discipline, deliver the highest quality patient care and create value for our shareholders. With that, we are ready to answer your questions.

(Operator provided instructions.) Our first question comes from Whit Mayo with Leerink Partners.

Debra, I was hoping that you could elaborate more on the correction plans that you have in place for the underperforming de novos. I hear the organizational changes, the standardization efforts. It might be helpful to hear more about the specifics on what the action plan is.

We have specific plans, as I mentioned, and they really focus on continued ramping of occupancy into the facility. They focus on access with our partner to make sure that we have communication in place. They also focus on service lines that we might do in each facility. In other words, what services, what are the timelines? Do we need CON approval? Do we need other licensure for them? We've been working with our partners to make sure we're aligned with them on these plans. We entered these partnerships to meet a need they had, and each plan is really tailored to the partner, the market and, in some cases, the unique features that we see in some of the states.

Okay. That's helpful. And then maybe just on the payer denials, a little more color on that. What's new in terms of payer behavior? It sounds like that's factored in the full year guide. And maybe just how much of the increase in AR days is influenced by that or is something else going on?

Thanks for that question, Whit. Yes, bad debts and denials started to stabilize in Q4, but then they continued to get a little bit worse in Q1 than what we had previously expected. We do have good game plans in place to make sure we're doing everything to advocate for our patients and to improve on overall collections. We're having good responses, but they are running a little hotter than what we had expected. And so we've reflected that in the full year expectations. That being said, there is a lot of focus at our facility level with the finance and ops teams on revenue cycle management and doing our best to make that less than what we've currently forecasted.

I'll just add that we are looking at our processes and where the improvements can be. We're using tools to enhance what we're doing with respect to documentation, making sure we're in compliance. We are appealing denials, as Todd mentioned. We've also brought back Larry Hard on a temporary consulting basis. He, as some of you may know, worked with Acadia and retired, but he did an excellent job during my last tenure with this area. He has come in to evaluate where and what we need to improve. I think it's fair to say we have a lot of opportunity.

Maybe just one clarification. Is there any one specific type of payer? Was it managed Medicaid, something else broad-based? Just a little more detail.

It's more broad-based, Whit. I wouldn't say there's any one specific area. That's why we're taking advantage of improvements and efforts across the entire enterprise.

Our next question comes from Matthew Gillmor with KeyBanc.

I wanted to ask about the seasonality with EBITDA implied in the guidance. It seemed pretty typical versus historicals. I appreciate in the deck you called out the Medicaid supplementals being higher in the back half and then you've also got the impact from the ramping facilities. How are you thinking about the seasonality? Are we correct that it's pretty normal? And then can you help size the EBITDA contribution from the Medicaid supplementals and the ramping facilities as we think about the back half EBITDA?

Yes, Matthew, thanks for the question. Overall, we feel great about how we've started the year and the performance on the EBITDA and our ability based off a good Q1 to increase our full year expectations. We've tried to be very clear on the cadence with the guidance, just given how volatile the quarterly results were in 2025 that created some noise into that seasonality. But fundamentally, what we said at the start of the year and what's driving the back half now is the same thing. It's what you just called out. It's slightly higher supplementals in the back half on a run rate basis, the core embedded supplementals we have in our business. It's been the ramping facilities. As we noted, Q1 was better than we expected on the '23 to '25 cohorts. And so that continues to have a bigger incremental year-over-year contribution in the back half. Those are the big drivers. Plus, as Debra mentioned in the prepared remarks, we have done a number of cost programs and cost efficiencies at the end of Q1 that we think also provides benefits over the course of the year.

And then as a follow-up on the New York Medicaid issue, it seems like you're doing better there than you thought. Could you provide some details in terms of how you're backfilling the capacity with those Pennsylvania facilities?

We have a very active business development team that is working with referral sources in surrounding states. One of the states is New Jersey. Certainly, we also have been working with referral sources in Maryland, and we've seen an increase in Pennsylvania referral sources. It's a very concentrated effort to try and refill these beds. We're also still focused on working with New York to see if we can reopen those referrals. We're in conversation with them, but we're not at a place to provide more detail at this time. Our referral sources there have benefited from having these facilities, so we're working with them and focusing our efforts on those relationships.

Our next question will be from Pito Chickering with Deutsche Bank.

Two questions. One more on bad debt denials. Are payers pushing back on things like length of stay or actual coverage once they've been admitted? And is that why the admission guidance was increased, but the patient days were left unchanged?

Overall, the length of stay change we're seeing across the enterprise is more a math exercise than it is anything changing in the business. We closed four specialty facilities last year, plus we now have the challenges on specialty in Pennsylvania. Those are all just longer average lengths of stay on average than acute. At the same time, we've been bringing a lot of new acute beds into our business over the last year, and that's continuing here in Q1 with the opening of Tufts and will continue in Q2 with the opening of Orlando Health and Methodist Jennie Edmundson. So it's really just a math exercise of specialty beds being down and acute beds being up, and those lengths of stay then working through as we presented. As you'd expect, shorter length of stay in acute with more beds there means admissions are higher while the length of stay of those patients is lower.

Okay. Perfect. And then can you actually quantify how much more supplemental payments we get in the back half of the year versus the first half? Can you quantify how the ramping facilities should be growing in the back half versus the first half? And are there other things you put in your bridge like the benefit costs reversing, so any way to quantify the first half to the back half bridge?

Overall, it isn't a massive acceleration in the back half given what we've guided to for the first half on EBITDA. There's a lot of moving parts in our business. Right now, we're calling out a slight increase in supplementals, high single digits to low double digits, not something like $30 million. We are excited about what we're seeing on the ramping facilities from 2023 to 2025 — they overachieved expectations in Q1 and will contribute more. Start-up facility losses tend to peak in Q2 and then improve in the back half as well. So there are several contributors to the small increase in second half EBITDA versus first half.

Our next question comes from Ben Hendrix with RBC Capital Markets.

I wanted to dig into the acute operational restructure, specifically around the referral efforts across the acute platform. What inning are you in with the referral network enhancements? How should we think about the magnitude and timing of what you're trying to achieve in acute?

Referral sources are critical to our business and we've always had strong relationships with them across our service lines. What we're focused on now is making sure they see our outcomes and that we are not putting up barriers for them to refer. We are in active communication about what services their patients may need. In specialty, we have treatment placement specialists who work with referral sources; we have similar teams in acute and RTC. As we generate more outcome data, which we've started to put on our website, we expect to further validate why referral partners should send patients to our facilities. The team is actively working with those referral sources to improve access and communication.

Our next question comes from Brian Tanquilut with Jefferies.

Congrats on a good quarter. Debra, you've called out some leadership changes. After a few months, how are you thinking about the operational or organizational structure in terms of where there are opportunities to reduce infrastructure or positions that have been added over time? Thinking through the G&A opportunity and other areas of improvement as you bring the band back.

We have taken a hard look at our corporate overhead and determined what's needed now by the facilities. There was a middle layer of management that had been added over time; after discussions with the field and those using the support, we made decisions to eliminate some of that middle layer. We believe this will speed decision-making and better align with our priorities: excellent patient care and improved performance. We also reduced the number of facilities and the geography our division leaders cover, making oversight more manageable so they can focus on problem solving and growth, especially with new facilities. I also aligned the joint ventures under a leader to transfer best practices across JVs and improve ramping. The changes have been embraced and we expect to see the benefits over the year.

Our next question comes from Ryan Langston with TD Cowen.

Todd, thanks and best of luck at NVA. One more on the bad debt. You mentioned improving documentation processes internally. Are the issues you've identified fixable in the short term, or are they more of a longer-term process to improve?

Ryan, documentation is key. We need to ensure what we are offering and doing for the patient is accurately reflected in the medical record. There are areas where we can better reflect acuity and make sure we're covering everything payers need to see. We firmly believe the patients in our facilities need the level of care we provide and we want that reflected. The effort has been ongoing and we've escalated it. We're using tools to create more visibility and are in very early stages of incorporating AI into revenue cycle management to analyze data and improve processes. We expect to streamline and improve documentation and the supporting processes.

Our next question comes from John Ransom with RJS.

The legacy management team talked about fallout from negative press on specialty referrals, given people do Google searches and that stuff pops up. Given your results, are you finally beyond that effect?

Yes, we are. We actually saw very strong performance at some of our specialty programs that pull patients from around the country. Our commercial payer mix is up, and that team is doing very well. We have outstanding facilities, and I was pleased to see positive results in specialty facilities that attract patients nationally.

Was there also an emphasis historically on B2C and some commercial relationships that needed to be reestablished? Am I remembering that right?

You're not making it up. We had shifted some focus away from commercial. We've strengthened that focus and added to our business development team. Those relationships are strong and we've worked to better communicate the differentiators of our facilities because there is competition for patients who travel. The team is doing a good job reinforcing why patients should come to our facilities.

Lastly, quality can be nebulous in behavioral health. If you had three or four metrics for an elevator pitch to payers to say why you're different and better, what would they be on the acute side?

First is patient satisfaction — what their experience is in our facilities. Second is clinical improvement — are patients leaving with an improved condition, and we have measurement tools around that. Third, we track readmissions and the period of time post-discharge. We're expanding outcome tracking across all service lines, not just acute, and we use those metrics to demonstrate to payers and referral partners the outcomes and improvements patients achieve in our care.

Our next question comes from Joanna Gajuk with Bank of America.

This is Joaquin Agada on for Joanna Gajuk. Could you give us an update on labor? How does wage growth look, what are hiring trends, and how has retention been?

Things are good. For the eighth consecutive quarter, our retention has improved, which is valuable for training and reducing disruption. On a same-facility basis, labor costs were up 3.7%, and per patient day they were up 2%, consistent with Q4. The team is doing a good job managing labor without sacrificing quality or compliance, with less premium pay and fewer inefficiencies. Overall numbers are up as we open new facilities, and those improve as we fill beds and occupy more.

Great. I wanted to touch on your AI comment earlier. What are your plans and how are you looking to implement AI further?

We're looking at different tools, including prediction of care to understand risks better. We're evaluating AI within our electronic medical record systems and running pilots before larger rollouts. We're attuned to the changing environment and have a strong IT team digging in and providing tools to improve operations and revenue cycle performance.

Our next question comes from Andrew Mok with Barclays.

I wanted to follow up on the strong same-store admissions. They were up 6.5% in the quarter. Can you elaborate on the drivers of that acceleration and whether it's a leading indicator for patient day growth? Also, start-up losses are tracking around $15 million per quarter — when should that number start to diminish?

Start-up losses were $12 million in Q1, $2 million better than expected, and our full year guidance reflects that. We now expect $47 million to $51 million in start-up losses for the year. We previously said $15 million in Q2, which is likely the high end on a quarterly basis. Regarding admissions, a lot of the increase is driven by new acute beds coming on and ramping in new facilities. Acute has shorter length of stay, so admissions rise even if patient days don't rise as quickly. We're encouraged by the referral network driving admissions and progress on filling beds at our new acute facilities.

I'll add that inquiries for acute were up over 20% in the first quarter. Our RTC census was very strong, and we had strong performance in some specialty facilities that attract patients nationally. We've adjusted our marketing approach, including targeted digital spend, and are using tools to bring in new referral sources, not just rely on existing ones. Demand remains strong, and those efforts are contributing to admissions growth.

Bailey, any more questions in the queue?

There are no more questions. This concludes our question-and-answer session. I would like to turn the conference back over to Debra Osteen for any closing remarks.

I just want to end by thanking all of our employees and the corporate staff for their dedication and hard work to ensure that our patients receive excellent care. Thank you all for being with us this morning and for your interest in Acadia Healthcare. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.